Canadian Imperial Bank of Commerce v. Pamukbank Tas

• Decision Date: 12 December 1994
• Citation: 166 Misc.2d 647,632 N.Y.S.2d 918
• Parties: , 28 UCC Rep.Serv.2d 979 CANADIAN IMPERIAL BANK OF COMMERCE, Plaintiff, v. PAMUKBANK TAS, Defendant.
• Court: New York Supreme Court

Page 918

632 N.Y.S.2d 918

166 Misc.2d 647, 28 UCC Rep.Serv.2d 979

CANADIAN IMPERIAL BANK OF COMMERCE, Plaintiff, v. PAMUKBANK TAS, Defendant.

Supreme Court, New York County IAS Part 27.

Dec. 12, 1994.

Golenbock, Eiseman, Assor & Bell, New York City, for Plaintiff.

Horowitz, Pomerantz & Shapiro, New York City, for Defendant.

IRA GAMMERMAN, Justice.

Defendant Pamukbank Tas ("Pamukbank"), a Turkish bank, moves for an order: (1) dismissing the complaint, on the grounds of comity, or, alternatively, on the ground of forum non conveniens, (2) annulling this Court's prior order of attachment, and (3) awarding costs and damages to defendant, including attorneys' fees, sustained by reason of the attachment.

Plaintiff Canadian Imperial Bank of Commerce ("CIBC") opposes defendant's motion and cross-moves for an order granting summary judgment in its favor on the complaint.

Metalsac Ticaret Ve Sanayi Ltd. ("Metalsac"), a Turkish company, entered into an underlying sales contract with Taylor Steel Inc. ("Taylor"), a Canadian corporation. Under this contract, (1) Taylor was to supply and deliver certain specified goods to Metalsac in Turkey, and (2) payment was to be made by an irrevocable deferred letter of credit to be drawn upon by Taylor after shipment of the goods. At the request of its customer Metalsac, defendant Pamukbank issued this letter of credit for $640,000 in United States dollars. Taylor was named as the beneficiary of this letter of credit. CIBC was identified as the confirming bank in the transaction. After CIBC made payment to Taylor, it was to be reimbursed by Pamukbank through Pamukbank's Bank of New York account, located in New York City.

After shipment of the goods, Taylor presented allegedly conforming documents to CIBC. CIBC made payment to Taylor and then sought reimbursement. Subsequently, Metalsac alleged that the goods shipped by Taylor were non-conforming. Metalsac commenced an apparent breach of contract action against Taylor in Turkey seeking $583,400 in damages for the non-conforming goods. In February 1993, Metalsac obtained a Turkish court order in this foreign action, which arguably preliminarily restrained payment from the Bank of New York account by Pamukbank under the letter of credit to the extent of $583,400 (i.e., the total amount sought by Metalsac against Taylor). Therefore, pursuant to this foreign restraining order, Pamukbank would only pay CIBC $56,375.04 (i.e., the monies owed that were not in dispute between Taylor and Metalsac). It is undisputed that in light of Pamukbank's partial payment, the outstanding principal amount owed by Pamukbank on the letter of credit is $583,400. Pamukbank sought to intervene in the Turkish action and to overturn the restraining order. The Turkish Court allowed Pamukbank to intervene. However, the court refused to withdraw the restraining order.

CIBC commenced this State action against Pamukbank raising two causes of action. The first is for breach of contract on the letter of credit transaction. The second cause of action is for violation of the Uniform Customs and Practice for Documentary Credits ("UCP"). Essentially, CIBC seeks to compel Pamukbank to meet its outstanding payment obligation on the letter of credit for the sums which CIBC paid to Taylor. This Court previously granted an order of attachment prohibiting any payment on the letter of credit from the Bank of New York account.

Comity

Initially, Pamukbank contends that this complaint must be dismissed under the doctrine of comity. Specifically, Pamukbank asserts that the complaint must be dismissed because: (a) performance of the letter of credit contract was in Turkey and Canada, not New York, (b) the Turkish Court had proper jurisdiction, ¹ and (c) recognition of this foreign decree would not offend the public policy of New York.

CIBC counters, among other things, that the foreign court had no jurisdiction to restrain Pamukbank's obligation to pay under the letter of credit since the performance of the letter of credit transaction was in New York.

A recognition of a foreign court decree is dependent on the doctrine of comity, Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95. While courts are not required to do so, generally, courts of this State "will accord recognition to the judgments rendered in a foreign country under the doctrine of comity absent a showing of fraud in the procurement of the foreign judgment or unless recognition of the judgment would offend a strong [public] policy of New York", Lasry v. Lasry, 180 A.D.2d 488, 489, 579 N.Y.S.2d 393; see also Gotlib v. Ratsutsky, 83 N.Y.2d 696, 613 N.Y.S.2d 120, 635 N.E.2d 289; Greschler v. Greschler, 51 N.Y.2d 368, 376-377, 434 N.Y.S.2d 194, 414 N.E.2d 694). The parties apparently agree that a "foreign court's decree restraining a party to a contract cannot excuse a performance [of a contract which was] to take place in the United States * * * [the foreign decree] will [only] excuse a performance to take place within that court's jurisdiction", RSB Manufacturing Corp. v. Bank of Baroda, 15 B.R. 650, 654 [SD NY 1981] (citing 6A Corbin on Contracts at sec. 1351). ² In sum, if the performance of the letter of credit contract was to take place in New York, then the foreign court order, which prohibits that performance, cannot be given effect under the doctrine of comity. Thus, here, the critical issue is where the performance of the letter of credit transaction was to take place.

Relying principally on Sabolyk v. Morgan Guaranty Trust Co., 1984 WL 1275 and RSB Manufacturing Corp. v. Bank of Baroda, 15 B.R. 650, supra, Pamukbank claims that the parties' consent for payment on the letter of credit to take place in New York is too insignificant under contract principles to deem it a performance in New York. In both RSB (supra ) and Sabolyk (supra ), the letters of credit expressly provided for payment by the advising and paying banks to be made in New York. The RSB and Sabolyk courts stated that the critical determination for the place of performance is where the letter of credit is actually issued. Thus, since in those cases, New York was not the site of issuance, it was not the site of performance even though the letters of credit had provisions for payment in New York. Significantly, the RSB and Sabolyk courts held that the situation would be different if the advising and paying banks were confirming banks.

Here it is undisputed, that (1) Pamukbank was a confirming bank, (2) the place for Pamukbank's payment was to take place in New York, (3) the shipment of the goods and issuance of the letter of credit took place outside the United States, (4) the payment was to be made in United States dollars, and (5) the letter of credit, while stating the UCP governs, was silent as to the choice of law to apply. Accordingly, the Court determines that, here, the place of performance of the letter of credit contract was to be New York, J. Zeevi and Sons, Ltd. v. Grindlays Bank (Uganda) Ltd., 37 N.Y.2d 220, 371 N.Y.S.2d 892, 333 N.E.2d 168, cert. denied 423 U.S. 866, 96 S.Ct. 126, 46 L.Ed.2d 95 (rejecting the foreign decree, the Court held that, among other things, New York law applies where payment was to be made in New York with United States dollars and New York has vital interest to enforce international commerce transaction); Chuidian v. Philippine Nat. Bank, 976 F.2d 561, 563 (citing RSB [supra] and Sabolyk [supra ] (designation of place of payment under a letter of credit does not alter the rule that place of performance is to be place of issuance of the letter of credit, unless the paying bank is the confirming bank); Banco de Vizcaya, S.A. v. The First Nat. Bank of Chicago, 514 F.Supp. 1280, 1287 (analogizes J. Zeevi and Sons, Ltd., 37 N.Y.2d 220, 371 N.Y.S.2d 892, 333 N.E.2d 168, supra, and rejects foreign court's injunction since under the letter of credit, the paying bank was a confirming bank and payment was to be made in the state). Therefore, here, the foreign court order restraining the performance of the contract (i.e., payment in New York) is to be given no effect, RSB, supra (under comity doctrine, foreign decree is to be given no effect if foreign court has no jurisdiction). Pamukbank's motion is denied to the extent it seeks to dismiss the complaint under the doctrine of comity.

Forum non conveniens

Alternatively, Pamukbank argues that the complaint should be dismissed on the grounds of forum non conveniens. CPLR 327(a) provides:

When the court finds that in the interest of substantial justice the action should be heard in another forum, the court, on motion of any party, may stay or dismiss the action in whole or in part on any conditions that may be just. The domicile or residence in this * * * state shall not preclude the court from staying or dismissing the action.

Under CPLR 327, a court is given discretionary power to dismiss an action with little or no connection with New York "where it is determined that the action, although jurisdictionally sound would be better adjudicated elsewhere", Islamic Republic of Iran v. Pahlavi, 62 N.Y.2d 474, 478 N.Y.S.2d 597, 467 N.E.2d 245, cert. denied 469 U.S. 1108, 105 S.Ct. 783, 83 L.Ed.2d 778. In determining whether to retain jurisdiction, the court must consider a number of factors. While no one factor is determinative, these factors include the burden on New York courts, the potential hardship to defendant, the unavailability of an alternative forum in which the plaintiff may bring suit, whether both parties to the action are nonresidents, the situs of the transaction and the location of documents and witnesses, Id.

Considering all of the relevant factors, this Court finds that the causes of action in this action should be heard in New York. First, the performance of the letter of credit transaction was to be in New York, (see Comity discussion, supra ). Thus, Pamukbank's contention, that the complaint should be dismissed because New...